Saginaw Chippewa Indian Tribe of Mich. v. Blue Cross Blue Shield of Mich.

• Decision Date: 07 August 2020
• Docket Number: Case No. 16-cv-10317
• Citation: 477 F.Supp.3d 598
• Parties: SAGINAW CHIPPEWA INDIAN TRIBE OF MICHIGAN, et al., Plaintiffs, v. BLUE CROSS BLUE SHIELD OF MICHIGAN, Defendant.
• Court: U.S. District Court — Eastern District of Michigan

477 F.Supp.3d 598

SAGINAW CHIPPEWA INDIAN TRIBE OF MICHIGAN, et al., Plaintiffs,

v.BLUE CROSS BLUE SHIELD OF MICHIGAN, Defendant.

Case No. 16-cv-10317

United States District Court, E.D. Michigan, Northern Division.

Signed August 7, 2020

Aaron M. Phelps, Bryan R. Walters, Herman D. Hofman, Jeffrey David Koelzer, John Joseph Rolecki, Kyle Patrick Konwinski, Perrin Rynders, Varnum LLP, Grand Rapids, MI, William L. Thompson, Varnum LLP, Detroit, MI, for Plaintiffs.

Aimee R. Gibbs, Dickinson Wright PLLC, Ann Arbor, MI, Brandon C. Hubbard, Nolan John Moody, Samantha A. Pattwell, Dickinson Wright, PLLC, Scott R. Knapp, Lansing, MI, Carmen Dorris, Kathleen A. Lang, Michelle L. Alamo, Phillip J. DeRosier, Rebecca D. O'Reilly, Salina M. Hamilton, Dickinson Wright PLLC, Detroit, MI, Farayha J. Arrine, Dickinson Wright PLLC, Randall L. Tatem, Horizon Global Corporation, Troy, MI, for Defendant.

OPINION AND ORDER GRANTING MOTION FOR SUMMARY JUDGMENT, DENYING AS MOOT MOTION FOR RECONSIDERATION OF ORDER DENYING MOTION TO COMPEL, AND DISMISSING AMENDED COMPLAINT

THOMAS L. LUDINGTON, United States District Judge

On January 29, 2016, Plaintiffs Saginaw Chippewa Indian Tribe of Michigan and the Welfare Benefit Plan ("Plaintiffs" or "the Tribe" or "SCIT") brought suit against Blue Cross Blue Shield of Michigan ("BCBSM"). The next month, Plaintiffs filed an amended complaint. ECF No. 7. Plaintiffs’ allegations arose from BCBSM's administration of group health plans for employees of the Tribe and members of the Tribe. Plaintiffs alleged that BCBSM was charging hidden fees, overstating the cost of medical services, and violated its ERISA fiduciary duties by failing to demand Medicare Like Rates ("MLR") from medical service providers. See generally ECF No. 7.

On April 25, 2016, BCBSM filed a motion to dismiss Plaintiffs’ first amended complaint. ECF No. 14. The Court granted the motion and dismissed all counts except those allegations within Counts I and II claiming that BCBSM utilized hidden access fees. ECF No. 22. On April 10, 2017, Plaintiffs and BCBSM each filed separate motions for partial summary judgment. ECF No. 79, 81. The Court granted both motions in part. In its order, the Court determined that Plaintiffs had two separate health care plans with BCBSM. ECF No. 112 at PageID.6210–6214. One plan was for members of the Tribe and the other was for employees of the Tribe. The Court determined that only the plan for the employees was governed by ERISA.

Plaintiffs appealed the order to the Sixth Circuit. ECF No. 114. The Sixth Circuit affirmed the Court's judgment with the exception of the dismissal of Plaintiffs’ MLR claims. The Sixth Circuit found that

[T]he Tribe does not assert that the MLR regulations impose an additional duty on fiduciaries beyond what ERISA itself requires. Instead, the Tribe bases its claim on the text of ERISA itself, which requires fiduciaries to act prudently and solely in the interest of the plan's participants and beneficiaries. See 29 U.S.C. § 1104(a)(1). The Tribe alleges that BCBSM violated these duties by paying more than necessary for the Tribe's medical claims by failing to take advantage of the MLR regulations. That is enough to state a claim under ERISA.

BCBSM presents an alternative reason for affirming the district court's dismissal, arguing that its administration of the Tribe's plan simply is not subject to the MLR regulations. These regulations, BCBSM contends, apply only to the expenditure of IHS funds and do not limit the payment that hospitals must accept from a third-party payor, such as BCBSM, which is not expending IHS funds. Although BCBSM asserts that the Tribe's MLR claim therefore fails as a matter of law, BCBSM's argument is better understood as contending that the Tribe cannot show, as a factual matter, that the regulations apply to its ERISA plan. But since the Tribe has alleged that the BCBSM was aware of the MLR regulations, that BCBSM failed to ensure that the Tribe paid no more than MLR for MLR-eligible services, and that all other conditions precedent to the MLR claim were met, the Tribe has sufficiently pleaded that the MLR regulations are applicable to BCBSM's administration of the Tribe's ERISA plan. We emphasize that we express no opinion on the ultimate merits of the Tribe's MLR claim, and we hold only that it would be premature to dismiss the Tribe's claim at this stage of the proceedings.

ECF No. 135 at 14–15 (emphasis in original). The Sixth Circuit affirmed the Court's determination that there were two separate insurance plans and that only the plan for employees (some of whom are not members of the tribe) was governed by ERISA. Id. at 8–15.

On January 4, 2019, a stipulated order was filed reinstating Counts I, IV, and VI of Plaintiffs’ Amended Complaint "insofar as those Counts assert[ed] claims related to Medicare-Like Rates (‘MLR’)." ECF No. 141. Specifically, Plaintiffs acknowledge that the federal law requiring MLR intended to regulate "Medicare-participating hospitals" in order to benefit "Tribe[s] or Tribal organization[s] carrying out a CHS program of the IHS." ECF No. 7 at 29. Plaintiffs imply, but do not allege, that "Medicare-participating hospitals" charged Plaintiffs’ groups more than MLRs and that BCBSM did not enforce the MLR pricing requirement imposed on the hospitals.

Count I alleges that BCBSM was a fiduciary pursuant to ERISA because "it exercised discretionary authority and control over management" of the Employee Plan and its assets as well as responsibility over its administration. ECF No. 7 at 31 (citations omitted). Plaintiffs contend that BCBSM breached its fiduciary duty by "[p]aying excess claim amounts to Medicare-participating hospitals for services authorized by a tribe or tribal organization carrying out a CHS program." Id. at 30.

Count IV alleges that Plaintiffs are "health care insurers" as defined by the Michigan Health Care False Claims Act ("HCFCA"). Id. at 35. Plaintiffs contend that BCBSM violated this act by not applying the MLR discount rate for medical services received by Plaintiffs under the Member Plan. Id. Plaintiffs reason that BCBSM's presentation of the allegedly illegal claim for services by the Medicare-participating hospital also constitutes BCBSM's presentation of a false claim.

Count VI alleges that BCBSM was in a fiduciary relationship with Plaintiffs as defined by common law. Id. at 38. Plaintiffs contend that BCBSM violated its fiduciary duty by charging rates in excess of MLR. Plaintiffs reason that doing so was not in the best interest of Plaintiffs under the Plan. Id. at 38–39.

BCBSM filed a motion to dismiss Plaintiffs’ Amended Complaint. ECF No. 142. The motion was denied without prejudice and the parties were directed to complete discovery. ECF No. 146.

BCBSM has now filed a motion for summary judgment. ECF No. 142. It argues that it did not owe Plaintiffs a fiduciary duty under ERISA to verify that Medicare-participating hospitals that were delivering services to Plaintiffs’ employees at MLR. It contends that MLR is only available when services are sought out and paid for by a tribe's Contract Health Service. Because BCBSM paid for the services for the employees from an entirely different source, not Plaintiffs’ Contract Health Services, the services were not eligible for MLR. In the alternative, BCBSM alleges that Plaintiffs’ ERISA claims are time-barred by the statute of limitations. It further argues that it did not violate the HCFCA or breach a common law fiduciary duty because the services paid for by BCBSM from a different source were not eligible for MLR.

I.

A motion for summary judgment should be granted if the "movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law." Fed. R. Civ. P. 56(a). The moving party has the initial burden of identifying where to look in the record for evidence "which it believes demonstrate the absence of a genuine issue of material fact." Celotex Corp. v. Catrett , 477 U.S. 317, 323, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986). The burden then shifts to the opposing party who must set out specific facts showing "a genuine issue for trial." Anderson v. Liberty Lobby, Inc. , 477 U.S. 242, 250, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986) (citation omitted). The Court must view the evidence and draw all reasonable inferences in favor of the non-movant and determine "whether the evidence presents a sufficient disagreement to require submission to a jury or whether it is so one-sided that one party must prevail as a matter of law." Id. at 251–52, 106 S.Ct. 2505.

II.

The Tribe "is a federally recognized Indian tribe, pursuant to 25 U.S.C. [§] 1300k, with its Tribal Government headquarters located in Mt. Pleasant, Michigan." Am. Compl. ¶ 3, ECF No. 7. BCBSM is a large health insurance provider. BCBSM has provided insurance for the Tribe since the 1990s. Sprague Decl. at 2, ECF No. 81, Ex. 12.

A.

In the 1990s, the Tribe purchased a comprehensive health care benefits plan from BCBSM for its employees. Sprague Decl. at 2. This arrangement was fully-insured, meaning the Tribe paid a premium to BCBSM for coverage and BCBSM in return had sole responsibility for paying claims from the plan's participants. In 2004, the Tribe's contract with BCBSM for the fully-insured employee plan expired. Id. at 3. Instead of renewing the fully-insured plan, the Tribe opted to convert the Employee Plan to a self-funded arrangement by signing an ASC. Id. This meant that instead of paying insurance to BCBSM in return for coverage, the Tribe directly paid the cost of health care benefits and paid BCBSM a fee for administering the program.¹

The health insurance plan is memorialized in an Administrative Services Contract ("ASC") and explains the Parties’ general responsibilities. It provides:

BCBSM shall administer Enrollees’ health care Coverage(s) in accordance with BCBSM's standard operating procedures for comparable coverage(s) offered under a BCBSM

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